A winner in semiconductors is not for faint-hearted

Fund profile

September 26, 1999|By MORNINGSTAR

Anyone still looking for proof of the digital revolution needn't look much further than Fidelity Select Electronics Portfolio.

This fund is up a healthy 37 percent for the year to date through mid-July. That puts it in the technology category's top third for the period -- no mean feat considering its dearth of red-hot pure Internet plays.

Amid all the Net hoopla, the fund has kept its traditional focus on the comparatively mundane semiconductor, semiconductor-capital-equipment and PC sectors. As is usually the case, the two former areas have keyed the fund's performance. After slumping in early 1998, semiconductors have come roaring back amid renewed demand. PC-related names such as Micron and Intel have struggled, but firms that focus on specialty niches where there's more pricing power, especially the communications segment, have benefited handsomely.

One name that has added greatly to the fund's 1999 performance is top-holding Texas Instruments. The company, which is a big player in the market for chips for wireless handsets, is up better than 70 percent for the year to date. Other holdings in the communications space that have fared well include PMC-Sierra, Vitesse Semiconductor and Motorola. Among semiconductor-equipment firms, holdings such as Lam Research and KLA-Tencor have been especially strong.

Great performance is nothing new for this fund: Its stunning 32.5 percent 10-year average annual return is the best in Morningstar's database. Its focus on a narrow, cyclical segment of the technology sector shouldn't go unrecognized, however. When semiconductors cracked in mid-1998, it fared far worse than its average peer. That cyclicality and a fairly concentrated portfolio make the fund more volatile than the category norm. Nevertheless, for those who can stomach its risks, it has been a consistently adept player in its chosen niche.

Fidelity Select Electronics

Fund Manager: Matthew Grech

Largest investment sector: Semiconductors

Style: The fund's median investment is in growth stocks of companies with large market capitalizations.

Total returns as of 9/16/99

Year-to-date: 57.92 percent

One year: 151.04 percent

Three-year annualized: 47.87 percent

Five-year annualized: 45.32 percent

Risk vs. domestic equity funds: High

Morningstar rating: 5 stars

Maximum sales charge: 3.0 percent

Phone number: 800-544-8888

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